The impact of gated Communities on property values: evidence of changes in real estate markets -Los Angeles, 1980-2000

The impact of gated Communities on property values: evidence of changes in real estate markets -Los Angeles, 1980-2000

[SHS:GEO] Humanities and Social Sciences/Geography

Gated communities

property values

real estate markets

prices analysis

The paper focuses on how gated communities, as private means of providing public infrastructure and security, real estate <br />products and club-economies, produce changes in housing market patterns. Based on an empirical study of Los Angeles <br />(California) data, it aims to trace to what extent gates and walls favor property values and if the presence of gated <br />communities produces over time (1980-2000) a deterrent effect on non-gated properties abutting the enclave, or close to <br />it.Resulting from a demand for security, gated communities are a leading offer from the homebuilding industry. But their <br />spread emerges from a partnership between local governments and land developers. Both agree to charge the homebuyer <br />with the cost of urban sprawl (construction and maintenance costs of infrastructure within the gates). Such a structuring of <br />residential space is particularly desirable on the urban edges, where the cost of urban sprawl exceeds the financial assets <br />of local public authorities. New private developments provide local governments with new wealthy taxpayers at almost no <br />cost. As compensation, the homebuyer is granted private and exclusive access to sites and amenities (lakes, beaches, <br />etc.). Such exclusivity favors the location rent, and usually positively affects the property values within the gated <br />enclaves.But it is also assumed that operating cost of private governance are paid for by the increase of property values. <br />Market failure nevertheless occurs when costs rise above sustainable levels compared to property values.Changes <br />produced by gates yield to at least two outcomes. At first sight, residential enclosures produce a price premium, thus being <br />a smart investment. Furthermore, gated communities might well be able to generate enough property value to pay off the <br />price of private governance. But this analysis holds only on a short term basis. In the long term, larger and wealthier gated <br />communities are successful in shielding their property values and generate enough revenue to pay the cost of private <br />governance, whereas a majority of average middle class gated enclaves do not succeed in creating a significant price <br />premium, and / or did not maintain significant price growth during the last decade. Such gated neighborhoods are at risk of <br />a market failure in the private provision of urban infrastructure, leading to potential decay.

Le Goix, Renaud

Cybergéo

ISSN:1278-3366

2007-04

FRE

article in peer-reviewed journal

http://halshs.archives-ouvertes.fr/halshs-00204696

http://halshs.archives-ouvertes.fr/docs/00/20/46/96/PDF/Legoix07cybergeo.pdf